Common Mistakes Business Owners Make When Filing Insurance Claims

August 31, 2020

Nobody ever wants to find themselves in a situation where they have to file an insurance claim related to their business, but it unfortunately does happen.

Businesses face numerous risks everyday from property damage to fraud and employee injuries. Because business owners can have so many different things go wrong, it’s important to understand the most common errors made when filing insurance claims to avoid the same pitfalls.

1. Failing to contact the insurance company immediately

Just like anyone should do with an auto or homeowner’s insurance claim, a business claim is no different in that it should be dealt with immediately for a few reasons.

At the time of the loss, the details are still fresh and less likely to be scattered and fuzzy. Waiting even a few days can decrease the accuracy of reported facts. Additionally, insurers may question the severity of damages due to delayed reporting.

Most policies demand prompt notice after an event, so it’s essential to make sure the terms of filing a claim on the policy are completely understood. Failing to do this could result in heavy financial losses.

2. Admitting fault

Any insurance company will tell a business owner to never admit fault. Even when it seems like there could be no other possibility, leave it up to the insurer to determine the course of action. Admitting responsibility may prevent the insurer from being able to adequately provide a strong defense for the business owner.

Plus, admitting fault can actually breach the agreement on an insurance policy, so it’s better to use caution and just report the claim to the insurer to handle that aspect of the loss.

3. Failing to document details

Damage from an incident needs to be thoroughly documented to provide proof for the insurance company. Take pictures (too many are better than not enough) of the damage and other relevant details. Failure to provide adequate proof could result in a refusal of the claim or lower payout.

Also, be sure to record the date, time, and location of the loss. Make a note of any conversations or communication at the time of the damage.

The more information the insurance company has, the better chance of a successful claim.

4. Not understanding the policy

Policy jargon can be long-winded and confusing. Many business owners make the assumption that their policy may cover certain things like floods or business crimes, but that’s often not the case.

If an incident comes up that isn’t covered, business owners could face massive financial hardship, so it’s crucial to understand the ins and outs of any business insurance policy. Coverage gaps should be identified and dealt with promptly.

5. Advocate and appeal

It’s possible an insurer could deny a claim based on inaccurate or incomplete information. Remember, denials aren’t absolute. Insurance companies have an appeals process where a claim can be reanalyzed and processed if it is found to be legitimate.

You can also appeal a claim adjustor’s damage estimate by getting a second opinion. If there is a discrepancy in the numbers between the two, mediation is used to determine the fair amount.

Don’t be afraid to dispute and appeal a decision.

6. Discarding damaged goods

It may be tempting to get rid of equipment or property that has been damaged (such as water damage) but it’s imperative the damaged goods are kept to provide evidence to the insurance company.

Discarding damaged property can kill a claim before it is even able to be reported and processed.


Filing a business claim can be a tedious and complex process, but with the proper preparation it can go much more smoothly. Common mistakes while filing a claim like admitting fault or failing to document details can really have an effect on the claims process.

Ultimately, being prepared and well-versed in the verbiage of your commercial insurance policy will help prevent unexpected mishaps so your business can continue to thrive.

If you are unsure about what is covered in your policy, be sure to contact your insurer and identify any potential gaps in coverage. Property and liability insurance don’t cover everything, so it’s always a good idea to review your policy periodically to make sure your business needs are met.

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